Don't Say You Weren't Warned

Since its inception in 2004, Biiwii.com has sought to provide balanced analysis
during a time of unbridled bullishness in most global markets (two notable
exceptions being the US Dollar and the Japanese Yen). Along with this bullishness
comes ever increasing risk however and as any good trader knows, managing risk
vs. potential reward is of utmost importance. If you have followed the site
from the beginning, you have noted a distain for perma-bearishness along with
a sort of resignation that a liquidity fueled global casino atmosphere has
replaced any semblance of organic economic and market fundamentals.

I have personally done well casting my trades bullishly over the last four
years and the few bearish bets I have placed have been met with disappointing
results on balance. The first article I ever wrote, FrankenMarket
Lives ended with this...

"As entitled modern Americans, I can envision the majority seeing this
as bullish, and Alan Greenspan gaining even more accolades as the celebrated
maestro. Frankenmarket will probably get an extra bounce in its step. A warning
before you go full-bore bullish longer term though; for a reality check on
what hyperinflation means, do a little research on what Germany experienced
in the 1920's. By contrast, a garden variety Japan style deflation would
have seemed very tame. But it is too late for that now."

Well, the mechanics of the inflationary liquidity fest proved different than
I thought at the time with the Yen Carry Trade (YCT) taking center stage over
any outwardly obvious operations by the US Fed. But the result has been the
same; ongoing expansion of munny (def- a: funny munny, b: FrankenMunny) with
various global origins with no source more powerful nor influential than the
YCT. This is munny created through key strokes and leverage. It is munny that
thinks it is real or at the least wants to transform itself into something
real. Hence its desperation to convert itself into the hottest of plays like
the industrial commodities in service to the China growth story or the miraculous
US stock market that is trying to signal that all's well on the deck of the
good ship America. Much of this munny is even smart enough to try to hide in
the precious metals.

But in an age where debt and leverage giveth, what do you suppose will happen
when it taketh away? The Yen and the USD appear to be at important crossroads
and they hold the keys to near term market events. Being a natural bottom feeder
in my trading practices I would be buying Yen and USD here, which means I would
be selling stocks, commodities and be guarded on the precious metals. In a
future article I will explain why I do not plan to be without at least a core
of gold stocks and why I will plan to add to existing positions if they are
wood shedded along with most other assets. I also want to keep a close eye
on the US Dollar. But for today, I would like to present three charts of the
Yen, which I consider the most important potential trigger to what may be radical
changes in the investment landscape to come. Below are daily, weekly and monthly
charts of the Yen:

Yen daily sports a set up I just love to buy; a falling wedge down to support.
The noted area is not only short term support, but as a look at the monthly
chart to follow shows, it is actually very important long term support as well.

Yen weekly offers a view of strong bullish divergence in momentum indicators
even as the whole world seemingly either scoffs at the possibility of a strong
Yen rise or chooses to ignore its implications. Also, the Yen has clung to
the vestiges of a modest up trend and could be in the process of forming an
inverted head & shoulders pattern, which would be bullish.

Not concerned yet? Just a bunch of TA mumbo jumbo on a weekly chart? Well,
here is a simple monthly chart of the Yen showing a symmetrical triangle pattern
in the making since 1995. The Yen is at major support. The whole world is on
the other side of the boat. You do the math and please do not say you were
not warned. Being long over-pumped equity markets, China stories and commodity
assets would not be the place to be if the Yen makes a major move and all that
funny munny stops dead in its tracks.

Over at Trending123.com,
John Lansing notes that "cash is a position" and has backed this up by getting
his subscribers out of the markets in the last week or so. I have known about
this cat for years and in fact became interested in technical analysis in no
small part due to his influence and talent with charts. "Cash is a position" and
risk vs. potential reward must always be a primary consideration. Right now
I would rather be long caution than long CNBC.

For those who may agree with this analysis and are interested in the Yen and
USD for diversification and/or risk management purposes, Rydex offers its CurrencyShares
ETF's including Japanese Yen Trust
(FXY). We currently have no position but are strongly considering one in
this vehicle as well as a strengthening dollar fund such as the Rydex RYSBX to
serve as hedges against current gold stock holdings and the very few other
stock market longs currently held in the semiconductor and airline sectors.
But again, keep in mind Mr. Lansing's position: Cash is a position also...
and it's currently paying 5%.

Disclaimer:biiwii.com does not recommend that any trading or investment positions
be taken based on views expressed on this site. If you speculate or invest
it is suggested that you consult a financial advisor qualified in your area
of interest.